DETAILED TA & FA for SPY June 29 296/297 Bear Put Spread
We are taking a bearish position in SPY, S&P 500 ETF that represents 1/10th of the broad-market SPX. We are taking a bearish positions for both fundamental and technical reasons.
Our position is a bear put spread with expiry this Friday. We are writing the 296 puts and buying the 297 puts for a total debit of .73 per contract. Per contract, the max profit is $27 and the max loss is $73 if SPY finishes above 297 on Friday. This position has defined risk/reward characteristics and is -120 deltas.
Technically, there is a clear descending triangle. Descending triangles during downtrends serve as continuation patterns. When the price breaks through the support, it is best to take a short position, if there is a volume confirmation (done on high volume). This just occurred, thus we are initiating our position with a SPY price target of 290.82 (a drop of 92%, the height of the descending triangle formation.
This movement is confirmed by the negative and diverging MACD, Parabolic Stop and Reverse indicator above the candles and a DI- above the DI+ on the ADX.
Fundamentally, geopolitical tensions are escalating as the U.S. takes a hard line on Iran and China. Iran has announced that there is “no longer a path of a diplomatic solution” with the American President as Pres. Trump imposed sanctions yesterday. Mnunchin followed Trump’s lead and indicated that financial sanctions will be imposed. This leads to increased instability, and as the market is trading near all-time highs, would interfere with the bull run. U.S. officials also downplayed expectations from the Trump-Xi G20 meeting, which could have dire bearish consequences.
Our position is a bear put spread with expiry this Friday. We are writing the 296 puts and buying the 297 puts for a total debit of .73 per contract. Per contract, the max profit is $27 and the max loss is $73 if SPY finishes above 297 on Friday. This position has defined risk/reward characteristics and is -120 deltas.
Technically, there is a clear descending triangle. Descending triangles during downtrends serve as continuation patterns. When the price breaks through the support, it is best to take a short position, if there is a volume confirmation (done on high volume). This just occurred, thus we are initiating our position with a SPY price target of 290.82 (a drop of 92%, the height of the descending triangle formation.
This movement is confirmed by the negative and diverging MACD, Parabolic Stop and Reverse indicator above the candles and a DI- above the DI+ on the ADX.
Fundamentally, geopolitical tensions are escalating as the U.S. takes a hard line on Iran and China. Iran has announced that there is “no longer a path of a diplomatic solution” with the American President as Pres. Trump imposed sanctions yesterday. Mnunchin followed Trump’s lead and indicated that financial sanctions will be imposed. This leads to increased instability, and as the market is trading near all-time highs, would interfere with the bull run. U.S. officials also downplayed expectations from the Trump-Xi G20 meeting, which could have dire bearish consequences.